Flipkart-owned Myntra buys Jabong for Rs 470 crore

Flipkart-owned Myntra has bought rival Jabong for USD 70 million (around Rs 470 crore) — nearly half of its last year’s revenue — in a cash deal from Global Fashion Group (GFG) to consolidate position in the booming Indian e-commerce industry.

While Myntra will benefit from Jabong’s stronghold in categories like women’s apparel, the transaction will allow GFG to “refocus its business on core markets”.

The transaction is subject to customary closing conditions and is expected to close during the third quarter. Other firms like Snapdeal, Future Group and Aditya Birla-owned Abof were also in fray to acquire Jabong.

“Fashion and lifestyle is one of the biggest drivers of e-commerce growth in India. We have always believed in fashion and lifestyle segment and Myntra’s strong performance has reinforced this faith,” Flipkart CEO and co-founder Binny Bansal said.

This acquisition is a continuation of the group’s journey to transform commerce in India, he added.

According to the Internet and Mobile Association of India, e-tailing has grown at 57 per cent year-on-year, moving from Rs 24,046 crore to Rs 37,689 crore between December 2014 and December 2015. This is further estimated to touch Rs 72,639 crore by end of 2016.

Speaking to PTI, Myntra CEO Ananth Narayanan said there are no plans of integrating the businesses yet.

“Jabong has a lot of strengths. It gets 4 million monthly users, has many international brands. We will look at growing both the businesses and leverage capabilities,” he said.

Narayanan added there were certain segments like women’s apparel and certain geographies where Jabong has a strong presence in.

Myntra, which itself was acquired by Flipkart in 2014 in an estimated Rs 2,000 crore deal, will have access to a combined base of 15 million monthly active users.

Jabong has over 1,500 international high-street brands, sports labels, Indian ethnic and designer labels from more than a thousand sellers.

Some global brands that will be exclusive to both the platforms include Dorothy Perkins, Topshop, Tom Tailor, G Raw Star, Bugatti Shoes, The North Face, Forever 21, Swarovski, Timberland and Lacoste.

GFG said it reviewed multiple options over a period of several months and decided to sell Jabong to Flipkart Group for USD 70 million in cash.

With net revenues of 126 million euros for the 12 months ended March 31, 2016, Jabong represented 13 per cent of GFG’s net revenue.

Lorenzo Grabau, Chairman of GFG and CEO of Kinnevik (GFG’s largest shareholder) said the group “will now focus all our energy and capital in driving the growth of Lamoda, Dafiti, Namshi, The Iconic and Zalora across their 24 countries of operation”.
“We expect major players to keep acquiring niche and

smaller players to expand into more product categories, demographics and geographies, and add new functionalities to their offerings,” said Sandy Shen, Research Director, Gartner.

Jabong was founded in 2012. In September 2014, its investor Rocket Internet merged Jabong with four other online fashion retailers in Latin America, Russia, the Middle East, South-east Asia and Australia to create Global Fashion Group (GFG).

While Jabong has managed to reduce losses by reducing discounts, both Kinnevik and Rocket Internet seem unwilling to infuse fresh capital and are believed to be keen to exit.

In April, GFG raised fresh funding from existing investors at a lower valuation, raising 300 million euros from Rocket Internet and Kinnevik.

Post the last round, GFG was valued at 1 billion euros, a significant fall from earlier valuation of 3.1 billion euros.

As per a Rocket Internet investor presentation, Jabong had a net revenue of 32.6 million euros in Q1 2016, up 14 per cent from 28.6 million euros in the year-ago period. For FY2015, its revenues were at 122.1 million euros.